Summer 2015
How to Prevent Loss During the Holidays and Beyond

Reduce your shrinkage with these tips.

Theft will occur in your store and by a two to one margin your employees will steal the most from you, says John Hassard, loss prevention and security expert with Robson Forensic. About 2 percent of annual store sales will walk out the door as a result of theft. Shocking, yes, but it is the naked truth that many specialty retailers have a hard time facing. Once you acknowledge this issue, you can see loss as part of doing business (rather than take it personally) and can take steps now to reduce it just in time for the busy holiday shopping season.

Security experts Hassard and J. Patrick Murphy, President, LPT Security Consulting, agree that the most important way to decrease theft is to do everything possible to prevent it from ever happening. One of the best ways you can decrease theft is to have a set of policies and procedures in place that will create an environment that makes both employee theft and shoplifting difficult for would-be thieves. Hassard says that oftentimes smaller retailers are victimized by employees and customers because they often do not have good policies in place and management is poorly trained to detect theft. A good set of policies and procedures will also address what happens when a theft is suspected—and the best ways to proceed when theft happens.

For the safety of all involved, says Murphy, the procedures you need to have in place for your employees will direct them to nicely, gently get the customer out of the store, stop any further theft and to forget about what may or may not have already been taken. Of course, there are exceptions—an employee that’s embezzled large amounts of money, for example—but most thefts don’t exceed $200 so it’s most often the best course of action to stop the bleeding and move on, says Murphy.

It’s important to train your employees to respond properly to a delicate and possibly dangerous situation, and preparation for the holiday season is the perfect time to review and retrain your staff on loss prevention. The importance of such a review cannot be overstated, Murphy says, because serious injury—and even death—can and does often occur when store employees try to intervene in a shoplifting situation. No matter the value of an item, it is not worth injury or death. So, prepare your store and your staff for the inevitable while staying safe and being a place thieves do not like to
visit—or work.

Employee theft

Is it surprising to you that you will lose more merchandise and money to employee theft than to shoplifters coming into your store? Large retailers know this fact, which is why some of the country’s largest retail chains have turned their focus 100 percent to preventing employee theft and in doing so have seen their shrinkage numbers fall, says Hassard. It’s often difficult for many specialty retailers and managers to imagine that the employees they have hired, like to work with and trust to execute their vision are stabbing them in the back by stealing from them. Do not take it personally, says Murphy, just create practices that make it harder to pull off.

How to do that? Create an environment that includes thorough policies and procedures and make sure you are consistent with all employees in implementing them. Doing so will send a message that your establishment is not a place thieves will want to work because it’s just too hard to get away with anything.

Tips to prevent employee theft

iStock_000005203371_LargeIf employee theft is a concern, review these tips and implement these practices before the holiday rush:

1. Hire good employees and practice a thorough hiring process. Hassard recommends you take the time to verify candidates’ resumes and check that they worked where they said they did. Check references and conduct criminal background checks. You can also run their name with a store mutual association (like NRMA’s TheftDatabase.com) to see if they have ever been in trouble for theft or embezzlement that was not litigated in the courts. Think that’s too extreme? Many bad apples can be weeded out before they are even hired on staff, says Hassard. If they lied on any information they provided in the hiring process, it’s a good indicator they may be dishonest employees too.

2. Create rock-solid policies and procedures and, most importantly, use them. There are many different ways you can keep an eye on your business and employees—even if you’re not physically there looking over your employees’ shoulders all the time. Take the time, resources and use the technology necessary to create practices specific to your business that will prevent employee theft. You need policies for cash handling, refunds, gift cards and anything outside of the normal transaction. Both Hassard and Murphy recommend having a third-party review your standard operating procedures to help you identify any weak points. Even an early-stage business with limited capital can afford to have a consultant help. Many POS vendors will help you set up secure cash mana-gement practices and if you belong to a franchise, they may already have these practices developed. If you are an independent retailer, Murphy suggests you find a loss prevention expert and tell them you just want to hire them to review your policies and procedures and they will likely work with you based on your budget. Remember that any improvements you can make on reducing employee theft is money in
your pocket.

All the time and money spent on good, solid policies and procedures makes no difference if you don’t enforce them and do so without exception. Being inconsistent in implementing the rules will create a lax culture in your organization, says Murphy. Even if you are forgiving with only one employee, the others will find out about it and take advantage. You must stick to your guns and enforce your policies.

3. Review exceptions and ask questions. A good way to detect employee theft when it’s happening is to review any transaction exceptions, says Hassard. For example, when credit card numbers are typed in and not swiped or refunds are given without a customer signature. If you are consistently requiring certain steps to be taken with refunds, gift cards or discounts, you will notice when one specific employee is consistently failing to follow your guidelines.

Next steps

So, what do you do when you suspect an employee of stealing? First of all, don’t be in a rush to confront them, says Hassard. Take your time, sleep on it and let your emotions and anger subside. You will need to have a calm discussion with them at some point. Do what you can to verify your suspicions by investigating further and even consulting with a third-party expert. Hassard says to “think of every reason why it’s not theft.” You’ll then have to sit down with the employee and have a talk with them to share your suspicions. You don’t have to fire them on their first suspected offense, says Murphy. Use the opportunity as a teaching moment and see how they react. Review proper procedures with them and have them write a statement of the incident from their point of view. Through this process, if you get the sense they will not be a good employee going forward, you can fire them. Remember that it is inevitable that employees will steal from you and 100 percent of the time they will lie about it, says Murphy. He says your best option is to fire them for something other than the suspected theft (e.g., “conduct detrimental to the company”), stop the bleeding and move on. If you suspect the theft is for a large amount of money or merchandise you can certainly involve law enforcement and prosecute them but for average thefts the cost and risk associated with a legal battle is usually not worth it.

Shoplifting

Theft by visitors to your store can be much easier to detect, prevent and stop than employee theft; however at holiday time many employees are intimidated, unsure about how to approach a possible thief and afraid to tell anyone for fear of being wrong, says Murphy. The procedures you have in place should empower employees to prevent shoplifting before it even begins. When theft happens or when you or your employees suspect it’s happening, the safest course is to just “kill” the customer with kindness and attention as you stay with them until they exit the store.

Hassard says that the most successful retailers focus on training employees to deter shoplifters and that they should never apprehend or even confront suspected thieves. One of the first deterrence measures you can take is to know where your greatest areas of loss are within your business and deter that theft by securing those items behind the counter, if it’s feasible. Another great deterrent during the holiday shopping season is to hire off duty or retired police officers to help greet customers and for crowd control.

The coming holiday shopping season is a great time to take a fresh look at policies as well as refresh your employees training on how to deter would-be thieves and how to handle them once a theft is suspected. This is also a good time to have a third-party pro come in and review your practices. Your policies should address areas like how much cash to keep in the register, proper cash handling and what you can do if you suspect a shoplifter is present in the store.

The most effective, most important method for deterring theft is with what Hassard calls “aggressive customer service.” There are countless scenarios that your employees may encounter when they think theft is taking place. Train them how to approach that customer in a friendly manner by offering to help them find what they are looking for and nicely staying with the customer until they leave the store. “Have a scripted process,” says Murphy and use training time to role-play with employees. Emphasize to your employees that they should not at any time try or even give the impression of apprehending a possible shoplifter. “One bad stop equals a six-figure lawsuit,” says Hassard. Even graver than a lawsuit is the danger an employee could unknowingly put themselves or fellow employees in. For example, Murphy once worked on a case where an older employee was trampled and badly injured by a fleeing shoplifter that had been confronted by another employee. As a manager or owner, when you learn that a suspected theft happened in the store you need to reward the employee for a job well done and use the instance as a teaching opportunity for the rest of the staff.

In conclusion, the coming holiday season is the ideal time to review your loss prevention policies and procedures or develop and improve them while remembering that you cannot stop loss all of the time. Unfortunately, it’s part of doing business. However, the best thing you can do is keep your eyes open to it, prevent and deter it as much as possible. And keep your staff empowered and safe during what is expected to be a brisk holiday shopping season.

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Melissa M. Kellogg

Melissa M. Kellogg is a freelance writer specializing in small business, marketing, social media and retail business management. She is based in Edwards, CO, and is a regular contributor to GIFT SHOP magazine. Her work has also been published in various newspapers and magazines in the U.S. and Mexico
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